Manufacturers’ lobby group has warned that the move to start taxing small businesses turnover tax will have a huge impact on their operations.
The Kenya Association of Manufacturers (KAM) now wants the minimum tax abolished or suspended, until when effects of the pandemic are managed.
The association argue that the introduction of the minimum tax will hurt the economy and will discourage investors to Kenya.
“Introduction of a new tax based on turnover will hurt a company’s financial well-being such as creating cash-flow constraints,” noted the manufacturers’ body adding that the “minimum tax targets loss-making small companies that already face difficulties in paying taxes, especially with the current Covid-19 impacting businesses negatively.”
The body says that the tax comes at the height of a pandemic and was not well thought out, therefore, it should be shelved.
Local businesses will start paying a minimum tax starting in January 2021 that will be charged at the rate of 1% of the gross business turnover.
The charge was introduced in The Finance Act of 2020 to boost the government’s revenue collection.
Among businesses to be hit hardest by the tax move are low margin businesses, capital intensive businesses with tax incentives, new businesses, and loss-making companies.
The manufactures’ body is demanding that the tax in only applicable after five consecutive years of loss declaration for all companies.
KAM also wants a reduction of the minimum tax rate to 0.25%, in addition, to the State allowing for set-off against the future tax and a statutory definition of the tax.